Baptist Health has filed a lawsuit against Humana arguing the payer’s Medicare Advantage plans had underpaid for outpatient drugs purchased through the 340B Drug Pricing Program in light of a 2022 Supreme Court decision that amended rates set by the federal government.
In 2018, the Department of Health and Human Services (HHS) cut outpatient drug payments to hospitals participating in the pricing program, which requires drug manufacturers to sell drugs at a discount to safety-net providers, by nearly 30%. The Supreme Court ruled the cut unlawful in 2022, leading HHS to issue a one-time lump sum repayment of about $9 billion to impacted hospitals across the nation.
Montgomery, Alabama-based Baptist Health asserts that Medicare Advantage plans should follow suit, and, in failing to do so, “has breached its obligations to pay Baptist Health the proper, legal amount for its services," according to the complaint filed Friday in the Circuit Court of Montgomery County, Alabama (and since transferred to the U.S. District Court for the Middle District of Alabama).
The system’s hospitals have been in-network with Humana’s Medicare Advantage plans since 2005, according to the complaint. The pair’s contracts spell out payment rates to Baptist Health as a portion of a Baptist Health hospital’s Medicare allowable amount in effect upon the date when services were rendered.
“In other words, Humana’s payments to Baptist Health for outpatient prescription drugs under the agreement are based entirely on the lawful rates set by [the Centers for Medicare and Medicaid Services (CMS)] for traditional Medicare,” the system wrote.
Two Baptist Health hospitals, Baptist Medical Center South and Baptist Medical Center East, have agreements with Humana and participate in the 340B program, per the suit. Baptist Health said it has reached out to Humana following the court’s decision and as CMS shared its retroactive adjustments and repayments for a similar reimbursement of the difference between what the system was actually paid and what the payment would have been under the amended Medicare allowable rate.
“To date, Humana has refused to pay these damages, and its counsel has informed Baptist Health that it disputes any obligation to make such payments,” Baptist Health wrote in its complaint. “Humana’s refusal to act has worked a substantial windfall to Humana as it continues to hold funds provided by CMS for Humana’s Medicare Advantage plans without reimbursing Baptist Health for the amounts owed to it under the agreement.”
Alabama’s Baptist Health (not to be confused with Louisville, Kentucky-based Baptist Health, which has also recently feuded with Humana and other insurers’ Medicare Advantage plans) operates three hospitals and other primary and specialty care services across the state. It describes itself as the largest medical provider in Montgomery and serves a disproportionate number of low-income and vulnerable patients in central Alabama.
Fierce Healthcare has reached out to Baptist Health and Humana for comment.
The 340B program has lately been a focal point for industry groups. Pharmaceutical companies and other critics have pointed to the safety-net program’s substantial growth in recent years as a sign that health systems are abusing the program for greater revenues. Some lawmakers have voiced similar concerns and launched investigations into “how certain hospital systems” may be spending the funds they’ve saved through the program.
Late last year, HHS’ Health Resources and Services Administration, which oversees the program, began adjusting some pandemic-era flexibilities that lowered the bar for providers to dispense the discounted drugs across new outpatient sites. However, a federal district court ruling against the administration may have weakened its oversight authority and opened the door for hospitals to claim more discounts.